Since the first oil concession license was granted to Darcy Exploration Company in 1925, the Sultanate of Oman has come a long way to becoming: (a) one of the world’s most successful oil and gas producing countries; and (b) the largest oil and gas producing non-OPEC member in the Middle East. Initial reports on oil reserves conducted almost 100 years ago initially proved to be inconclusive.
In addition the first oil exploration well turned out to be dry, however this did not deter the Omani people. Since its very first discovery, oil and gas production in the Sultanate has steadily risen, year-on-year, reaching 340 million barrels in 2013. This figure represents a 2.3% increase in production compared to 2012 and is set to rise still further in 2014.
In 2013, the Ministry of Oil and Gas for Oman tendered out five new blocks, two of which have been awarded to international firms for exploration to commence this year.
These blocks are located in southern Oman, where the majority of oil and gas production within the country takes place.
This trend is set to continue, with the Ministry of Oil & Gas recently announcing at the International Unconventional Gas Conference and Exhibition that Oman will ‘continuously offer open blocks to the market’.
This announcement is made following the completion of negotiations for several other oil blocks, including two production sharing agreements, which the Government of Oman signed in December 2013: one with Total to develop an offshore block off the northern coast with an estimated investment of $133 million; and a second agreement with Petrogas Kahil to develop an onshore block in the Al Wusta region of Oman with an estimated investment of $45 million.
Oman remains focused on inward investment, with a large proportion of the revenue generated from the oil & gas sector being reinvested into the Omani people and infrastructure.
In a recent speech made by HE Nasser bin Khamis al Jashmi, the undersecretary of the Ministry of Oil & Gas, during a seminar held by Oman’s In-Country Value (ICV) Committee, it was estimated that Oman’s oil and gas sector would provide approximately $64 billion in additional ICV between 2013 and 2020.
Currently there are 22 international oil and gas exploration and production companies operating within the Sultanate. Each company works under a production sharing agreement and contributes to approximately 30% of the country’s total crude production.
Given the current level of international interest in the Omani market, the Omani Government’s willingness to open up this sector to international investors and the demonstrable need for expertise in accessing oil and gas within the region, the opportunities seem boundless and a far cry from the arid days of 1925.
By Ben Ewing, legal consultant, CMS Muscat/Dubai & Stephen Millar, partner, head of Energy, Projects and Construction, CMS London/Aberdeen
